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A New Twist on Sales Compensation

19 Mar, 2004 By: Wes McArtor imageSource

A New Twist on Sales Compensation

For a couple of years now, the industry has talked
about a variety of methods aimed at reinventing sales compensation. In my
travels, I’ve seen many successful programs implemented to ensure that
salespeople are compensated in a way that benefits both them and the dealership.
Behind the mechanics of all these programs is a factor that truly determines the
success of these programs—the culture of the company.

Over this past year, I’ve seen dealerships whose
growth has declined, some that have stayed the same and others that have
reported double-digit growth. In general, those companies reporting positive
growth have cultivated a culture of overwhelming positive attitude towards both
their internal and external customers. Could this customer centric approach,
made popular in our technician bonus program, be applied to sales compensation?
While the ideas in this article are not the end all program to motivate and
compensate sales, they do offer a unique approach to compensation that can have
varying degrees of application within the dealer community.

Facing the Issues

In our unique technician compensation plan, we pay a tech based on his ability
to manage as many service copies as possible with the least amount of cost. I
took this concept a step further for sales compensation and thought about the
issues that companies are wrestling with in today’s imaging dealership.

I don’t feel it’s necessary to recount all the
issues facing the motivation of salespeople, so I’ll narrow it down to three.
I’ll then provide an explanation of how our concept of paying salespeople, in
part on the images they sell as well as the box and the profit on that box,
addresses these problems.

The idea behind BEI’s sales compensation program
is to address the three most prevalent problems facing the sales department
today. First is the tendency of sales reps to re-sell the existing base without
adding enough new business. Second is the fact that the sales department has no
motivation to sell the “right” machine for the volume needed. Instead, they are
compensated to sell the highest priced machine they can convince the customer to
buy. Thirdly, the sales department has no incentive to find ways of increasing
the images produced by an existing customer.

In most copier dealerships today, sales reps are
paid a base/draw or salary in addition to a varying percentage of the gross
profit of the sale. With this in mind, it doesn’t matter if the machine sold is
replacing an existing customer’s unit or is a new placement. What does matter is
keeping the cost of the machine as high as the salesman’s ability will allow.
More often than not, if total cost of ownership is on the table, the tendency
will be to cut the service rate first as that will have less impact on the sales
rep’s compensation.

Flexible Compensation

BEI’s unique program addresses this in a whole new way. Our program, like tech
comp, is flexible so each customer can tailor the variables to their unique
situation. In most dealerships, there are a variety of tenure, experience and
ability levels and, as such, you see a variety of compensation plans to address
them. BEI’s program can address these differences.

It’s our belief that the MFP market has evolved to
the point that we are really selling prints/copies/pages. To some, this is
simply an evolution backwards to where we were years ago, when the aftermarket
profit was almost the only profit. With that in mind, we’ve designed our program
to base a portion of the salesperson’s compensation on the pages they sell, in
addition to the margin dollars. This is a sliding scale for a few important

When a new or less experienced sales rep begins
their career, their territory will initially produce very few copies to earn
commission from. Taking this into consideration, these reps will have a larger
percentage of the sales margin paid as commission. As they mature and sell more
pages, the scale begins to shift so that they are receiving less of their
compensation from the sales margin and more from the pages sold. This scale
progresses through six levels that are custom definable for your company.

This type of program accomplishes a number of
things at once. It encourages the sale of pages first. Why? Longer term per-page
residuals are more valuable than the one time sale. It also allows newer reps to
make a living on their initial sales because of the higher margin commission. In
reality, it could take six months or more to sell enough pages to make the
per-page residual worth much. Additionally, a sales rep will be encouraged to
keep their current customers happy because the loss of those pages will
negatively impact their commission. At the same time, they have a huge incentive
to sell new pages because the residual is greater than the potential margin
commission. We don’t want sales reps being too ready to reduce the sale price of
a machine, so a percentage of their pay needs to come from the profit of the
sale. But, we also need them to be more in tune with the volume the customer
plans to produce and place the machine that does that volume the best. Since we
are in the page acquisition business, we need them focused on new and higher
volume producing customers. The chart below features an actual dealer comparing
their current payouts to BEI’s method.

BEI Sales Compensation Program



Copy Limit







Percentage of Margin








CPC Commission










Total Copies

CPC Comm

Margin Comm

Gross Sales


Current Commission











































































Note: There is little difference between the
current commission and the “BEI Commission” which allows you to introduce BEI’s
program without creating huge dissent among the  sales staff. An additional
feature of BEI’s program is that users can input a sales quota and adjust the
commission received on the copies by the sales reps ability to achieve quota.

Compensation Example

Say you have a sales rep that sells $100,000 a month in gross sales and produces
$40,000 in profit. Currently they receive 32 percent of that as commission.
Their gross pay will be $12,800. For the sake of the example, we’ll say that
this sales rep’s territory makes five million copies per month. In our program
as an example, the rep will get 19 percent of margin, which would be $7,600 and
.0009 per-page commission that is $4,500. This makes a total payment of $12,100.

What happens differently in our program is that if
this rep continued to sell the gross dollars without increasing the page volume,
they would make less than a rep who sold the same dollars but added new pages to
their base. This is assuming that the profit margin dollars also remained
constant. If six months from now sales rep “A” still has five million copies,
while sales rep “B” now has eight million, sales rep “B” is going to make more
money. But then, so is the dealership because page acquisition is important. In
addition, if a sales rep sold the same total dollars doing mid-volume equipment,
his residual would not rise as quickly as a rep that sold the same 100k to
high-volume customers. This allows us to treat them fairly, yet encourage more
new page sales, maintain the overall sales margin and support/re-sell to current

An example of our sliding scale would have a new
rep getting 30 percent of the margin and .00024 per-page but only after a
million pages are being produced by his territory. Once they break three million
pages per month, they will get 26 percent and .0004. These break points are
custom to your dealership, as are the commission and percentage rates. Error
correction logic ensures that meters and copies paid per sales rep are accurate.

Considering a customer centric approach to sales
compensation allows dealers to customize how sales reps are paid and pays them
based on a number of factors including experience, initiative, page counts and
overall sales. If used properly, the program allows everyone to be a winner.

- - -

Wes McArtor is the owner and president of BEI
Services that offers customers copier performance comparisons and a variety of
benchmarking and reporting tools to improve machine and technician performance.
For more information on BEI’s Sales  Compensation Program, contact Wes McArtor,
at 316.772.0234 or Wes@beiservices.com.

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